A screen displays the GameStop logo and trading information on the New York Stock Exchange (NYSE) floor on March 29, 2022.
Brendan McDermid | Reuters
Incredible demonstration at GameStop Monday caused a loss of $1 billion for short sellers, according to data from S3 Partners.
Just an hour into Monday’s trading session, with GameStop soaring as much as 110%, short-selling hedge funds suffered $1.02 billion in losses at the gaming retailer, data firm S3 Partners said. traditional electronics.
“Expect to short this stock as it had a 100/100 score before today’s trading,” said Ihor Dusaniwsky, managing director of predictive analytics at S3.
Sudden increase in stock price seemingly enabled by “Roaring Kitty,” who encouraged an army of day traders to stock up on gaming stocks in 2021, a stretch that made Wall Street history. The internet personality, whose legal name is Keith Gill, posted a photo on X of a video gamer leaning forward in their chair as if to show he took the game seriously, posting first post on the platform since 2021.
The “meme stocks” The frenzy involves individual investors targeting short sellers and hedge funds who were pessimistic about the prospects of GameStop and other companies, forcing them to cover short positions and push up the target stock price.
Currently, GameStop’s stock short position amounts to more than 24% of all freely traded shares, also known as swimmeraccording to FactSet.
Including Monday’s losses, short sellers in GameStop lost $1.43 billion in May alone, according to S3.
“The related short squeeze should help push GME stock higher – but also expect new short sellers to enter the trade as GME stock is around or above $30 would be an attractive entry point for renewed short selling,” Dusaniwsky said.
Short selling is a strategy in which investors borrow shares of a stock at a certain price with the expectation that the market value will fall below that level when it comes time to repay the borrowed shares. .
GameStop wasn’t the only meme stock to gain on Monday. AMC rose 22%, while Reddit traded 17% higher.
“Short sellers could be in for a bumpy and bloody ride for these stocks,” Dusaniwsky said.
— CNBC’s Scott Schnipper contributed reporting.
